How Commodity Markets Made Our World Chaotic


Rupert Russell is a writer and filmmaker. He has toured twenty countries and made two award-winning documentaries. He holds a doctorate in sociology from Harvard and has published in The Independent, Dizzyand Salon.

Below, Rupert shares 5 key insights from his new book, Price Wars: How Commodity Markets Made Our World Chaotic. Listen to the audio version – read by Rupert himself – in the Next Big Idea app.

1. To understand disorder, you have to be disorderly.

To understand Putin’s postmodern warfare, I traveled to what was once eastern Ukraine and hid from sniper fire with Russian-backed separatists in snow-covered trenches. I traveled to Mosul, Iraq with the United Nations Bomb Disposal Unit to witness the post-apocalyptic wasteland left behind by the Islamic State. In Maduro’s Venezuela, I encountered an economic disaster so brutal that young women demanded sterilization and children formed gangs to fight over the trash in a sort of absurd Hobbesian nightmare, where the struggle to eat is a war of all against all.

I went to northern Kenya in search of the chaos that climate change will bring and found herds of cattle in a Martian landscape, guarding their goats with AK-47s. I joined the United Nations Peacekeeping Force, AMISOM, in Somalia to see how Al-Shabaab was exploiting the climate crisis by weaponizing hunger itself. And in 2019, the US border was in chaos. I traced the journey of migrants through the corridors of cartel control to the mountains of Guatemala, to see what had sent so many to America.

Each of these places surprised me – and surprised me in the same way. The closer I got to the people often thought to be responsible for so much of the carnage, like Putin, ISIS, or Al-Shabaab, the more those numbers went down. I have come to believe that we have misunderstood this power and the very source of the carnage itself.

2. Look at the maze, not the monster.

We often talk about these seizures as if they were brought on by a Godzilla-like creature, leaving paths of destruction wherever they go. At the moment, we see it with Vladimir Putin. Many try to get inside his head, to figure out what’s driving him, to figure out what he might do next. We seek to understand the monster at the center of the storm because we’ve been telling ourselves monster stories from the beginning. But in my travels I realized that in telling monster stories we had overlooked an archetypal feature: monsters confront man not in an open plan, but always in an elaborate labyrinth. Whether in ancient Greek myths or Hollywood movies, the labyrinth is as essential to the story as the creature itself.

“Real-life monsters, like Putin or ISIS, are not superhuman. . . their true power comes from the architecture they inhabit.

Think of the winding corridors of hotels in the brilliantthe spaceship in Extraterrestrialor the shopping center dawn of the dead. It is precisely these speakers that make the chase exciting. This is however not the feature we remember. Instead, we are captivated by the unusual and the grotesque. And as the media has embraced the tropes of the horror genre, they have incorporated its archetypal distortions. The monster is the star, inflated into an awesome physical creature whose destruction is understood through its monstrous biology, psychology, or ideology.

But real-life monsters, such as Putin or ISIS, are not superhuman. They are homo sapiens made of flesh and bone, and their true power comes from the architecture they inhabit. It allows as much as it constrains. And during the 2010s, walls came crashing down, cages unlocked, and monsters were unleashed. But who unlocked them?

3. Follow the money.

The current war in Ukraine is proving very costly for Russia; there is the cost of war as well as dealing with the huge penalties. Russia’s economy is roughly the size of Italy’s, so how can it afford to launch such a major military campaign? Where did the Kremlin get the money from? Well, Russia’s main export is oil, and the value of that export comes from its price in international commodity markets.

Now consider the timing of Russia’s modern military interventions: Afghanistan in 1979, Georgia in 2008, and Ukraine in 2014. These are all years of historically high oil prices, and the current war is no different. . The military buildup began last year with rising oil prices and peaked in February. It approached its previous peak in 2014, when Putin’s troops once again appeared in Crimea. The reverse is also true – low prices have historically put the Russian bear into a deep sleep. And it was not just the relative calm of the past six years or so that drove prices down, but more dramatically, the collapse of the Soviet Union in the 1980s when oil prices soared. Indeed, the pace of Russia’s excursions and retreats follows the price of its greatest export: oil.

“The pace of Russia’s excursions and retreats follows the price of its greatest export: oil.”

Of course, Russia is not the only country where this happens. Political scientist Cullen Hendrix did a study where he looked at 50 years of oil prices and conflict, and found it to be a universal feature. The Petrostates become more aggressive as the price of oil rises. Think of Saudi Arabia launching the war in Yemen in 2014, or Iran’s invasion of Iraq in 1981, as two other famous examples. But that brings us to another question: if high prices trigger conflict, what triggers high prices?

4. Perception trumps reality.

Anne Hathaway is a famous Hollywood actress. Warren Buffett is a famous investor whose company, Berkshire Hathaway, is publicly traded. When Anne Hathaway presented the Oscars, Berkshire Hathaway shares rose 2.94%. When his movie bride wars opened, Buffett’s shares rose 2.61%, as at the open of Passengers, Rachel is getting married, Valentine’s day, Alice in Wonderlandand Love and other drugs. But when Anne Hathaway had a car accident in 2011, Berkshire Hathaway shares fell just under 1%.

Somewhere Somewhere treated these two very different “Hathaways” as one, connecting them together and running a trade. That something was algorithms trained to read news that relates to a company or product, judge whether that news is positive or negative, and then execute a trade accordingly. That is, even when computers make the decisions, market prices are determined by perception, and that perception is often wrong.

In 2010, for example, commodity traders feared that wildfires raging on farms in Russia could lead to a global shortage of wheat. But it turned out that Americans had a bumper crop that year, and the world had never produced so much food. Nevertheless, the world price of wheat nearly doubled and, unable to eat, people took to the streets in dozens of countries. These protests would trigger a wave of chaos that would spread across the world and last for most of the decade.

“Market prices are determined by perception – and that perception is often wrong.”

5. Chaos is propelled by avalanches.

This rise in food prices was like a snowflake that came out of the sky and hit the snowy ground. When it did, it broke the tension of the snow below and unleashed a waterfall, an avalanche that grew and grew and grew. Food prices sparked protests, and those protests grew into a wave of demonstrations across the Middle East. They, in turn, grew up in what became known as the Arab Spring revolutions.

In Syria and Libya, these revolutions turned into civil wars and awoke a dormant Islamic State in neighboring Iraq that would turn these civil wars into total human disasters. Refugees began to flee to neighboring countries such as Egypt, Tunisia and Lebanon. In 2015, these refugees would arrive in Europe, creating what was then called the “global refugee crisis”. This, in turn, led to a right-wing populist insurgency across Europe. It pushed the UK towards Brexit, and even in America it gave Trump plenty of ammunition for his presidential campaign.

As these civil wars raged in the Middle East, commodity traders in Chicago, London and Atlanta feared that global oil supplies would be disrupted. They raised the price, taking into account the risk they thought was coming. But after a brief outage in Libya, the oil still continued to flow. Nevertheless, this created a speculative oil bubble from 2011 to 2014, which dumped a wave of black gold on petro-politicians around the world. Hugo Chavez, the leader of Venezuela, received a massive injection of cash just in time for his 2012 election campaign. ISIS, which had seized oil deposits in Syria, received around $2 million a day from the global market, which financed their advance through much of Syria and Iraq. Vladimir Putin, according to one estimate, got half atrillion dollars from the global commodity markets throughout this period and before that, plenty of money to finance its first military incursion into Ukraine in 2014.

Many of these petrodollars, whether from Russia, Saudi Arabia or even Norway, have also been invested in Western real estate. This, in turn, created huge wealth inequalities as prices in London, San Francisco and New York all rose. With the global refugee crisis also hitting in 2016, this has further fueled the rise of right-wing populism in Europe and the United States. It turned out that housing can propel revolutionary sentiment across the West just as much as bread can in the Middle East.

To listen to the audio read by author Rupert Russell, download the Next Big Idea app today:

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